Phosphatidylinositol 3‐kinase (PI3K) regulates many cellular functions including growth and survival, and its excessive activation is a hallmark of cancer. Somatostatin, acting through its G protein‐coupled receptor (GPCR) sst2, has potent proapoptotic and anti‐invasive activities on normal and cancer cells. Here, we report a novel mechanism for inhibiting PI3K activity. Somatostatin, acting through sst2, inhibits PI3K activity by disrupting a pre‐existing complex comprising the sst2 receptor and the p85 PI3K regulatory subunit. Surface plasmon resonance and molecular modeling identified the phosphorylated‐Y⁷¹ residue of a p85‐binding pYXXM motif in the first sst2 intracellular loop, and p85 COOH‐terminal SH2 as direct interacting domains. Somatostatin‐mediated dissociation of this complex as well as p85 tyrosine dephosphorylation correlates with sst2 tyrosine dephosphorylation on the Y⁷¹ residue. Mutating sst2‐Y⁷¹ disabled sst2 to interact with p85 and somatostatin to inhibit PI3K, consequently abrogating sst2's ability to suppress cell survival and tumor growth. These results provide the first demonstration of a physical interaction between a GPCR and p85, revealing a novel mechanism for negative regulation by ligand‐activated GPCR of PI3K‐dependent survival pathways, which may be an important molecular target for antineoplastic therapy.